What is Value at risk
Value at Risk (VaR) is a measure of the risk of investments. It estimates how much a set of investments might lose, given normal market conditions, in a set time period such as a day.
VaR is defined as for a given portfolio, time horizon, and probability p, the p VaR is defined as a threshold loss value, such that the probability that the loss on the portfolio over the given time horizon exceeds this value is p. This assumes mark-to-market pricing, and no trading in the portfolio.
Value at Risk (VaR) determines the potential for loss in the entity being assessed, and the probability of occurrence for the defined loss. Value at Risk (VaR) is measured by assessing the amount of potential loss, the probability of occurrence for the amount of loss and the time frame.